Swap shop

10 Apr 2006 By Antony Currie Follow @AntonyMCurrie

The $3bn swap of businesses with Bank of New York plays to the JP Morgan CEO s costcutting strengths. It s a baby step, but structured cleverly. If Dimon can just get JP Morgan s trading engine humming, bigger ones may follow.

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JP Morgan Chase and Bank of New York announced a swap of business units on Saturday. JP Morgan is buying BONY's retail and commercial banking businesses for $3.1bn, almost four times book value. BONY is buying JP Morgan's corporate trust business for $2.8bn, or 4.3 times book. JP Morgan will also pay $150m in cash to cover the difference in book values between the two units.

JP Morgan will get 338 branches, $15bn in retail deposits, Bank of New York's small and midsize corporate business, and a loan book of $8bn. JP Morgan may close up to 10% of the combined branches in the New York region once the deal is closed.

BONY will get $5tr in trust assets to add to its $3tr. JP Morgan received advice from its own investment bankers, while Goldman Sachs advised Bank of New York. The deal is expected to close in the third or fourth quarter this year.

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